JOSH FRYDENBERG:
The October numbers were a point in time because actually that data set was taken based on information from the 26th of September to the 9th of October. That saw an increase in the unemployment rate to 5.2 per cent, confirming what we know that lockdowns cost jobs. What this new previously unpublished payroll jobs data shows, the new hires in NSW have increased by 25 per cent in the fortnight to the 24th of October, so it’s post that jobs data for early October. It also shows that in - Victoria, new hires are up by 15 per cent, in the ACT - 22 per cent. Once these lockdowns end, the jobs come back. We’re very confident of a strong rebound in the labour market that we can see unemployment get back to the 4’s, bearing in mind it hadn’t been under 5 per cent for a decade. This was really good news for the labour market, but obviously, the Delta variant was a bit of an obstacle. But now that restrictions have ended, now that lockdowns have ended, we can now see a strong rebound in the labour market from here.
KIERAN GILBERT:
On that ATO information, you mention the state numbers. Across the country, the increase was by 13 per cent over the fortnight to the 24th of October. How many jobs are we talking about? Are we talking about tens of thousands of jobs and will that inevitably mean the unemployment rate will drop for November?
JOSH FRYDENBERG:
We are seeing thousands of new hires across the economy, but also importantly, we are going to see tens of thousands - if not hundreds of thousands - of people come off zero hours and back into work. We were starting to see that, actually, in the unemployment data in NSW, with more than 60,000 people coming off zero hours and getting back to work as that state was on the edge of re‑opening again. Overall, we are going to see thousands of people get new jobs, and we’re also going to see hundreds of thousands of people who have been coming off those zero hours.
KIERAN GILBERT:
The other new story today, unpublished Treasury analysis showing that bank spending data has consumer spending now greater than what it was pre‑pandemic. Will it be the consumer who drives this recovery into 2022?
JOSH FRYDENBERG:
It will be the consumer, it will be business; it will be a private sector led recovery. We, as the Government, are handing over the baton to the private sector to carry Australia’s economy forward as those lockdowns have ended. Our payments were emergency payments, once we got to that 80 per cent vaccination rate, we could bring those emergency payments to an end. But the good news is that people are spending. We saw in NSW and Victoria, $150 million extra being spent a day after the lockdowns had eased. This new Treasury analysis of bank data for the week ending the 7th of November, shows that spending, for example, in NSW is significantly up, in Victoria it is significantly up, and indeed, 25 per cent up on pre‑COVID numbers. So, it is a positive sign that people are spending again as restrictions have eased.
KIERAN GILBERT:
One of the flow on impacts of that, I guess, is a risk to inflation with the labour market tight as well. You met with your US colleague late last week. They’ve got their own issues, a 30‑year high, in fact, in inflation. Does that inevitably have a flow‑on here and will it drive up our own rates and petrol prices? Should people be worried?
JOSH FRYDENBERG:
Well, Kieran, the situation in the USA is different to Australia. In the US, inflation numbers, which as you say were 30‑year highs and above 6 per cent, saw 30 per cent increases in energy prices over the last 12 months. That was the single largest factor that driving these inflation numbers, there’s also been higher food prices. If you strip out energy and food prices, then that number would have been reduced to 4.6 per cent. Yet here in Australia, our underlying inflation rate is at 2.1 per cent, which is at the lowest end of that band that the Reserve Bank of Australia sets of between 2 and 3 per cent...
KIERAN GILBERT:
There is no direct flow‑on effect here? The RBA won’t have to move earlier in terms of lifting rates?
JOSH FRYDENBERG:
They are different scenarios. Here in Australia, there is spare capacity in our economy, particularly in our labour market. That gives us a bit of flexibility to respond. There will be a normalisation of monetary and fiscal policy over time, that is obviously a result of the economy coming back to life after the lockdowns. But the situation in the US and Australia is different. There is though, one pressure that both our countries are facing right now and that is supply side constraints. We saw during the pandemic the demand for goods go up, as the ability to consume services went down as a result of the health restrictions; restrictions on your travel, restrictions on enjoying hospitality, restrictions on other service related purchases. Whereas goods went up. We’ve actually seen nearly a 10 per cent increase in import volumes through the pandemic. This is putting pressure on our ports, and we’ve seen around a doubling of freight costs as a result of what has been experienced through the pandemic. That is a cost to business, that flows through to inflation, and that has been experienced in the US, as it is here in Australia.
KIERAN GILBERT:
The Net Zero target, the modelling was released on Friday afternoon. One key element, that you in fact flagged prior to the announcement of the policy, was that access to capital markets would see the cost of capital - and we’ve got a number on this now, don’t we, of about 100 basis points, 1 per cent increase on the cost of capital if nothing were to be done on this front?
JOSH FRYDENBERG:
Treasury did some analysis and provided input to that Department of Industry modelling. What Treasury’s central scenario was that you could see a 100 basis point increase in the cost of capital as a result of not being part of a broader effort to reduce emissions in the way that we are, indeed part of our Net Zero by 2050 target. Obviously access to debt and equity markets is important for business, but it’s also important for governments. We have around half of our government bonds purchased by overseas investors. We have $4 trillion in foreign investment. About 20 per cent of bank borrowing is done offshore. This can all flow through to the cost of capital here in Australia, that was the central scenario that Treasury analysis showed; that a 100 basis point increase in the cost of capital as you went from going to your preferred credit providers to your second tier ones, that would be a consequence of inaction. But we have taken action and we are taking action with response to reduce our carbon footprint and being part of this global consensus to reduced emissions by 2050.
KIERAN GILBERT:
You’re not worried about the blowback from voters who are concerned you haven’t made a commitment to an increased target for 2030, for example? Something Boris Johnson has been pushing nations to do.
JOSH FRYDENBERG:
Kieran, electors right around Australia can see our genuine commitment to reducing emissions and that is, obviously, been proven by the fact we are down by more than 20 per cent on 2005 levels. That can be seen in our technology investment roadmap which is focusing on hydrogen, carbon capture and storage, soil carbon, new battery technologies, solar cell technologies. I mean, 90 per cent of solar cells for commercial use around the world use Australian technology. It’s a remarkable statistic and it goes to the very concrete actions we’ve been taking here in Australia to develop the best technologies and export them to the world. So, there is a very strong track record of reducing emissions, as well as a forward looking commitment to that 2050 target and the plan to get there.
KIERAN GILBERT:
Finally, Matt Kean said to me on the Afternoon Agenda program during the week that his Government, that he had signed a COP26 declaration to phase out zero emission cars by 2040. Will the Federal Government allow that to go through or will you seek to block that?
JOSH FRYDENBERG:
We’re focused on practical initiatives, Kieran, to invest in electric vehicles, that includes their charging stations and a range of other initiatives that we have undertaken. Matt, in NSW, will have his own targets and own policies. We, at the Federal level, will again set Australia up to reduce emissions, consistent with that Net Zero target by 2050, and a whole range of other initiatives through the Clean Energy Finance Corporation, through ARENA…
KIERAN GILBERT:
So the Federal Government wouldn’t block that NSW target?
JOSH FRYDENBERG:
I can just tell you what we’re focused on here federally, that is getting to Net Zero by 2050 which I think is a very significant step forward. A very important point Matt understands and that I understand because we’re both Treasurers is that there is not a binary choice between being a stronger economy and having a smaller carbon footprint. Our emissions, as I said, are down by more than 20 per cent since 2005, yet at the same time, our economy has grown by 45 per cent and an additional 3 million people are employed. So, I’m pretty upbeat about the prospects for Australia in terms of reducing our emissions and growing our economy. You can start to see the labour market data, where the jobs are coming back after lockdown. We’ve seen business confidence up quite significantly. We’ve seen consumer confidence up eight out of the last nine weeks, we’ve maintained our AAA credit rating, one of only nine countries in the world to have such a credit rating from the three leading credit rating agencies. Money has been accumulated on household and business balance sheets through this pandemic which is now being spent through the economy. So, I look at the Reserve Bank and their forecasts for next year, Kieran, they’ve upgraded growth from 4 ¼ per cent to 5.5 per cent, and I think your viewers have a lot to look forward to in 2022.
KIERAN GILBERT:
Treasurer, Josh Frydenberg, thanks for your time on Sunday Agenda.
JOSH FRYDENBERG:
My pleasure.